Big Changes Ahead: New Solar Tax Credit Rules Under the One Big Beautiful Bill Act

With the passing of the One Big Beautiful Bill Act on July 4, 2025, major shifts are coming for solar incentives, specifically federal tax credits. If you’ve been on the fence about solar, now’s the time to act — there’s a short window to maximize your savings. We’re going to briefly highlight the main changes in legislation that are relevant to the solar industry below. 

Residential Solar Tax Credit Ends in 2025

Only systems that are installed and operational by December 31, 2025 will qualify for the 30% tax credit. The 30% federal Investment Tax Credit for residential solar and batteries that was previously in effect until 2034 is now done away with completely after December 31, 2025. It is important to note that the window of opportunity is a short 5 months. Utility approvals for grid-tied systems often take 3–6 weeks, so homeowners shouldn’t wait until the last minute to start the process. Reach out now to get on our schedule before the end of the year.

Good news: If you already have solar, this law doesn’t affect your system or eligibility for the tax credit.

Commercial Solar Tax Credits Will Be Phased Out Over The Next Few Years

Commercial solar uses a different tax credit, under Section 48E, that will remain available for systems in service before 2028. Commercial solar projects must begin within 12 months of July 2025 and completed by 2028 in order to qualify for this federal tax credit. Full credits end for solar projects that begin construction after July 4, 2026, unless placed in service by December 31, 2027. Projects that begin construction by July 4, 2026 can be completed later without a placed-in-service deadline. The deadline is the end of 2027 if beginning of construction is after July 2026.

However, for solar projects beginning in the next few years, there are now sourcing requirements for system components (modules, inverters, batteries). The new Foreign Entity of Concern (FEOC) rules deny tax credit for solar projects using materials from China, Russia, Iran or North Korea. Starting January 1, 2026, new solar installations are subject to FEOC rules. Any solar installations completed before January 1, 2026 are exempt from the FEOC rules. You cannot receive tax credits if your project uses solar equipment where the Material Assistance Cost Ratio (MACR) rules aren’t met (i.e., minimum U.S.-sourced component percentages). The US Treasury will issue clear guidelines on how to calculate MACR. These material assistance thresholds will ratchet up over time. 

There remain numerous benefits to solar, however, the payback period may be prolonged when the tax incentive is eliminated in 2026. We’re here to help you understand the changes and install your system before the deadline. Contact us today for a free quote.